The Pandemic’s Job Market Myths

123 total views

Amid the pandemic, people thought the labor market had permanently changed in important ways. It was a bad bet.

Remember the “she-cession”? What about the early-retirement wave, or America’s army of quiet quitters?

For economists and other forecasters, the pandemic and post-pandemic economy has been a lesson in humility. Time and again, predictions about ways in which the labor market had been permanently changed have proved temporary or even illusory.

Women lost jobs early in the pandemic but have returned in record numbers, making the she-cession a short-lived phenomenon. Retirements spiked along with coronavirus deaths, but many older workers have come back to the job market. Even the person credited with sparking a national conversation by posting a TikTok video about doing the bare minimum at your job has suggested that “quiet quitting” may not be the way of the future — he’s into quitting out loud these days.

That is not to say nothing has changed. In a historically strong labor market with very low unemployment, workers have a lot more power than is typical, so they are winning better wages and new perks. And a shift toward working from home for many white-collar jobs is still reshaping the economy in subtle but important ways.

But the big takeaway from the pandemic recovery is simple: The U.S. labor market was not permanently worsened by the hit it suffered. It echoes the aftermath of the 2008 recession, when economists were similarly skeptical of the labor market’s ability to bounce back — and similarly proved wrong once the economy strengthened.

“The profession has not fully digested the lessons of the recovery from the Great Recession,” said Adam Ozimek, the chief economist at the Economic Innovation Group, a research organization in Washington. One of those lessons, he said: “Don’t bet against the U.S. worker.”

Here is a rundown of the labor market narratives that rose and fell over the course of the pandemic recovery.

Women lost jobs heavily early in the pandemic, and people fretted that they would be left lastingly worse off in the labor market — but that has not proven to be the case.

Note: Data is as of June 2023 and is seasonally adjusted.

Source: Bureau of Labor Statistics

By The New York Times

In the wake of the pandemic, employment has actually rebounded faster among women than men — so much so that, as of June, the employment rate for women in their prime working years, commonly defined as 25 to 54, was the highest on record. (Employment among prime-age men is back to where it was before the pandemic, but is still shy of a record.)

Another frequent narrative early in the pandemic: It would cause a wave of early retirements.

Historically, when people lose jobs or leave them late in their working lives, they tend not to return to work — effectively retiring, whether or not they label it that way. So when millions of Americans in their 50s and 60s left the labor force early in the pandemic, many economists were skeptical that they would ever come back.

Notes: Percentages compare June 2023 to the 2019 average. Data is seasonally adjusted.

Source: Bureau of Labor Statistics

By The New York Times

But the early retirement wave never really materialized. Americans between ages 55 and 64 returned to work just as fast as their younger peers and are now employed at a higher rate than before the pandemic. Some may have been forced back to work by inflation; others had always planned to return and did so as soon as it felt safe.

The retirement narrative wasn’t entirely wrong. Americans who are past traditional retirement age — 65 and older — still haven’t come back to work in large numbers. That is helping to depress the size of the overall labor force, especially because the number of Americans in their 60s and 70s is growing rapidly as more baby boomers hit their retirement years.

Technology layoffs at big companies have prompted discussion of a white-collar recession, or one that primarily affects well-heeled technology and information-sector workers. While those firings have undoubtedly been painful for those who experienced them, it has not shown up prominently in overall employment data.

Note: Data is seasonally adjusted.

Source: Bureau of Labor Statistics

By The New York Times

For now, the nation’s high-skilled employees seem to be shuffling into new and different jobs pretty rapidly. Unemployment remains very low for both information and for professional and business services — hallmark white-collar industries that encompass much of the technology sector. And layoffs in tech have slowed recently.

It looked for a moment like young and middle-aged men — those between about 25 and 44 — were not coming back to the labor market the way other demographics had been. Over the past few months, though, they have finally been regaining their employment rates before the pandemic.

That recovery came much later than for some other groups: For instance, 35-to-44-year-old men have yet to consistently hold onto employment rates that match their 2019 average, while last year women in that age group eclipsed their employment rate before pandemic. But the recent progress suggests that even if men are taking longer to recover, they are slowly making gains.

All these narratives share a common thread: While some cautioned against drawing early conclusions, many labor market experts were skeptical that the job market would fully recover from the shock of the pandemic, at least in the short-term. Instead, the rebound has been swift and broad, defying gloomy narratives.

This isn’t the first time economists have made this mistake. It’s not even the first time this century. The crippling recession that ended in 2009 pushed millions of Americans out of the labor force, and many economists embraced so-called structural explanations for why they were slow to return. Maybe workers’ skills or professional networks had eroded during their long periods of unemployment. Maybe they were addicted to opioids, or drawing disability benefits, or trapped in parts of the country with few job opportunities.

In the end, though, a much simpler explanation proved correct. People were slow to return to work because there weren’t enough jobs for them. As the economy healed and opportunities improved, employment rebounded among pretty much every demographic group.

The rebound from the pandemic recession has played out much faster than the one that took place after the 2008 downturn, which was worsened by a global financial blowup and a housing market collapse that left long-lasting scars. But the basic lesson is the same. When jobs are plentiful, most people will go to work.

“People want to adapt and people want to work: Those things are generally true,” said Julia Coronado, the founder of MacroPolicy Perspectives, a research firm. She noted that the pool of available workers expand further with time and amid solid immigration. “People are resilient. They figure things out.”

Share this Post

About Us

Our mission is to bring retirement news, financial information, and advice to seniors enjoying their golden years.